Clinton set to fly into new political storm in Bangladesh

DHAKA (Reuters) - Secretary of State Hillary Clinton may be forced to walk her second diplomatic tightrope in a week when she lands in Bangladesh on Saturday, with Dhaka lurching towards its worst period of political tension in years.

Her trip will be the first by a senior U.S. official in 12 years - her husband, President Bill Clinton, visited Bangladesh in 2000 - and comes after relations between Washington and the poverty-stricken South Asia nation hit a rare chill.

Fresh from a diplomatic nightmare in China, where U.S. officials have faced the dilemma of how to deal with prominent activist Chen Guangcheng, Clinton will have to tread carefully again during her 24-hour visit to Dhaka.

Political volatility has become the norm in Bangladesh, where Prime Minister Sheikh Hasina and her arch-rival Begum Khaleda Zia - they are known as the "battling Begums" - have fought over the premiership for decades.

Clinton is due to meet Hasina and other senior government officials, as well as opposition leader Khaleda, barely two weeks after Khaleda's Bangladesh Nationalist Party (BNP) staged two countrywide general strikes that lasted five days in all.

Her visit was originally planned for early last year but was put back, apparently over Washington's displeasure with the removal of Nobel laureate Muhammad Yunus from Bangladesh's pioneering micro lender, Grameen Bank.

"This visit is significant because an earlier visit was postponed over the Yunus issue," Delwar Hossain, professor of International Relations at Dhaka University, told Reuters.

"Now it seems that the stalemate is over."

Regardless, Clinton will still land amid simmering tensions after the strike, called in protest against the mysterious disappearance of a former BNP lawmaker.

Khaleda's BNP and Hasina's Awami League party have accused each other of abducting former lawmaker Ilyas Ali. Five people were killed in clashes between police and protesters during the strikes, three of whom were shot dead, the worst violence in the past three years of Hasina's rule.

Ali disappeared last month, his abandoned car and mobile phone found by police near his home. Hasina's government has ordered a probe but police deny BNP charges that they were involved in his disappearance.

The BNP says it wants Ali returned safe and well or it will turn the protests into a single-issue movement aimed at forcing the government to step down and have new elections called.

Hasina shows no sign of relenting to the BNP's demands, with the next elections not due until the end of 2013.

Clinton is expected to bring up the harassment of opposition figures, the disappearance of political leaders and human rights violations, and may press for a return to a system where elections were held under a non-party caretaker administration.

OPPOSITION PLEDGES NO DISRUPTIONS

Bangladesh has lagged behind the region in economic growth, partly because of its history of political instability since independence in 1971, and analysts fear that more unrest could derail its ambition to become a middle-income country by 2021.

Yunus, an economics professor who set up Grameen Bank decades ago, was made to quit his post as managing director supposedly because he had stayed in the job until he was 70, 10 years longer than the legally mandated age for it.

Yunus' friends at home and abroad described the move as a political vendetta by the government against what it saw as a potential future challenger to Hasina.

Known around the world as the banker to the poor, Yunus is also a family friend of the Clintons and he is expected to meet Clinton in Dhaka, although that has not been confirmed.

Bangladesh's foreign ministry and the U.S. embassy in Dhaka said details of Clinton's visit are still being worked out. The opposition has said it will not do anything that could derail Clinton's visit.

"We would not go ahead with any program that could hinder Clinton's stay," senior BNP leader Moudud Ahmed said.

Officials said other issues to be discussed include boosting trade with the United States, strategic collaboration to tackle militancy in South Asia and elsewhere, and energy cooperation.

Analysts say a U.S. secretary of state visit will itself be a big boost for Hasina's government, which is struggling to keep voters happy and deliver on election promises.

"The visit will depict the importance of Bangladesh in the external world because she will also visit India and China. This is a great diplomatic success for the government," Dhaka University's Hossain said.

Bangladesh will also seek more U.S. help for its struggling economy and to battle poverty through additional investment and quota-free access for goods to U.S. markets. In January, Washington said it would provide close to $1 billion in aid for Bangladesh over the next five years.

Washington wants Dhaka to sign a Trade and Investment Cooperation Forum Agreement and a strategic partnership.